The regulations promulgated under the Patient Protection and Affordable Care Act (ACA) allowing religious nonprofit employers to opt out of providing contraceptive coverage do not substantially burden the employer’s religious exercise under the Religious Freedom Restoration Act (RFRA), 42 U.S.C. §2000bb et seq., ruled the Second Circuit in a challenge to the contraceptive mandate brought by two nonprofit Catholic high schools. The court also held that, in reference to the accommodation for religious nonprofits, a substantial burden does not exist where an organization argues that its religious exercise is violated by the government’s internal operations.

Background. The ACA requires employers with 50 or more full-time employees to offer a group plan or group health insurance coverage that provides minimum essential coverage unless an exception applies, including coverage of all FDA-approved contraceptive methods, sterilization procedures, patient education, and counseling for female employees without cost sharing, including copayments or deductibles.

An exemption to the mandate exists for religious employers, which includes “churches, their integrated auxiliaries, and conventions or associations of churches,” as well as “the exclusively religious activities of any religious order.” In response to objections from religiously affiliated organizations that did not qualify for the religious employer exemption, the government created an accommodation, which applies more broadly to religious nonprofit organizations that object to providing contraceptive coverage. The accommodation allows such employers to opt out of paying for objectionable medical services, which would then be provided by the employer’s insurer or third-party administrator. The provision of contraceptive coverage by the insurer or third-party administrator is spurred by the employer’s completion of EBSA Form 700, which is sent to the employer’s insurance company or third-party administrator, or by the sending of a letter to HHS detailing the religious objections.

Religious employers. Cardinal Spellman High School and Monsignor Farrell High School (the schools) are nonprofit Catholic high schools in New York that are affiliated entities of the Roman Catholic Archdiocese of New York. The schools, which qualify for the accommodation to the mandate, offer health insurance to employees under the Archdiocese’s self-insured health plan, administered by United Healthcare and VCS Caremark as third-party administrators. The schools argue that the contraceptive coverage mandate, including the accommodation, violates their rights under the RFRA. The RFRA provides that the government “shall not substantially burden a person’s exercise of religion” unless the application of that burden is the least restrictive means of furthering a compelling government interest.

RFRA analysis. The RFRA required the court to assess whether the schools had shown a substantial burden on their exercise of religion. The schools argued that the mandate constitutes such a burden by forcing them to choose among three unacceptable options:

(1) provide contraceptive coverage;
(2) pay the fines and penalties associated with failure to provide contraceptive coverage; or
(3) opt out of the mandate via the accommodation using either method of self-certification.

“Modicum of paperwork” no substantial burden. The Supreme Court in Burwell v. Hobby Lobby Stores, Inc. identified the accommodation as a way to alleviate a substantial burden on the religious exercise of for-profit corporations. However, the schools contend that by submitting the opt-out notification, they are indirectly facilitating the provision to their employees of objectionable contraceptive coverage. The Second Circuit held that the schools failed to show a substantial burden, as the only obligation actually imposed on them is to identify themselves as religious objectors. The court stated, “Through a modicum of paperwork, an eligible organization throws the entire administrative and financial burden of providing contraceptive coverage on its insurers or third-party administrator.” This simple act imposes no substantial burden on the schools’ religious exercise.

Government’s internal operations no substantial burden. The court rejected the argument that forcing the schools to choose between the accommodation, which the schools maintained to be religiously objectionable, or suffering substantial penalties puts pressure on the schools to modify their behavior and violate their beliefs. It also rejected the argument that the accommodation is a substantial burden because it renders the schools complicit in bringing about consequences forbidden by their religion, as courts “have not found a substantial burden where a plaintiff argues that her religious exercise is violated by the government’s internal operations or, by extension, its decision to burden third parties, even where the plaintiff plays a precipitating role.”